UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No.1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 9, 2022
Stronghold Digital Mining, Inc.
(Exact Name of Registrant as Specified in Its Charter)
(State or other Jurisdiction of Incorporation)
001-40931
(Commission File No.) | | 86-2759890
(I.R.S. Employer Identification No.) |
| | | |
595 Madison Avenue, 28th Floor New York, NY (Address of Principal Executive Offices)) | | 10022
(Zip Code) |
(845)-579-5992
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | | Trading Symbol(s) | | Name of exchange on which registered |
Class A Common Stock, par value $0.0001 per share
| | SDIG
| | The NASDAQ Stock Market LLC
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
This Current Report on Form 8-K/A amends the Current Report on Form 8-K of Stronghold Digital Mining, Inc. (the “Company”), originally furnished by the Company to the Securities and Exchange Commission on November 9, 2022 (the “Initial 8-K”). The sole purpose for filing this Form 8-K/A is to correct certain information contained in Exhibit 99.1 to the Initial 8-K related to the Company’s financial statements, as described further below. Except as stated in this Form 8-K/A, no other changes have been made to the Initial 8‑K or Exhibit 99.1 thereto. A correct Exhibit 99.1 is attached to this Form 8-K/A as an exhibit.
| Item 2.02. | Results of Operations and Financial Condition. |
On November 9, 2022, prior to filing of the Initial 8-K, the Company issued an earnings press release announcing its financial results for the quarter ended September 30, 2022. The unaudited condensed consolidated balance sheets, unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flow included in the earnings press release filed on November 9, 2022 and the Company’s Quarterly Report on Form 10-Q filed on November 10, 2022 were correct, however, the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statement of operations, unaudited condensed consolidated statement of cash flow and written description of the third quarter financial results included on Exhibit 99.1 to the Initial 8-K contained incorrect figures due to a clerical error when submitting the Initial 8-K to the printer. The corrected items for Exhibit 99.1 to the Initial 8-K are presented in the excerpts below (with original reported items struck and the corrected items in bold type and underlined).
***
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | | September 30, 2022 | | | December 31, 2021 | |
| | | (unaudited) | | | | |
| ASSETS: | | | | | | |
| Cash and cash equivalents | | $ | 16,723,511 | | | $ | 31,790,115 | |
| Digital currencies | | | 2,186,704 | | | | 7,718,221 | |
| Digital currencies, restricted | | | - | | | | 2,699,644 | |
| Accounts receivable | | | 775,038 | | | | 2,111,855 | |
| Due from related parties | | | 58,735 856,156 | | | | - | |
| Prepaid insurance | | | 980,180 | | | | 6,301,701 | |
| Inventory | | | 3,316,716 | | | | 3,372,254 | |
| Assets held for sale | | | 39,008,651 | | | | - | |
| Other current assets | | | 1,527,938 | | | | 661,640 | |
| Total current assets | | | 64,577,473 65,374,894 | | | | 54,655,430 | |
| Equipment deposits | | | 24,385,876 | | | | 130,999,398 | |
| Property, plant and equipment, net | | | 182,869,685 194,479,685 | | | | 166,657,155 | |
| Land | | | 1,748,439 | | | | 1,748,440 | |
| Road bond | | | 211,958 | | | | 211,958 | |
| Security deposits | | | 348,888 | | | | 348,888 | |
| TOTAL ASSETS | | $ | 274,142,319 286,549,740 | | | $ | 354,621,269 | |
| LIABILITIES: | | | | | | | | |
| Current portion of long-term debt, net of discounts and issuance fees | | $ | 90,298,367 | | | $ | 45,799,651 | |
| Financed insurance premiums | | | 307,385 | | | | 4,299,721 | |
| Forward sale contract | | | - | | | | 7,116,488 | |
| Accounts payable | | | 28,491,137 33,963,438 | | | | 28,650,659 | |
| Due to related parties | | | 2,212,145 | | | | 1,430,660 | |
| Accrued liabilities | | | 7,385,258 7,197,121 | | | | 5,053,957 | |
| Total current liabilities | | | 128,694,292 133,978,456 | | | | 92,351,136 | |
| Asset retirement obligation | | | 992,201 | | | | 973,948 | |
| Contract liabilities | | | 132,093 | | | | 187,835 | |
| Paycheck Protection Program Loan | | | - | | | | 841,670 | |
| Warrant liabilities | | | 5,056,065 | | | | - | |
| Long-term debt, net of discounts and issuance fees | | | 7,607,240 | | | | 18,378,841 | |
| Total long-term liabilities | | | 13,787,599 | | | | 20,382,294 | |
| Total liabilities | | | 142,481,891 147,766,055 | | | | 112,733,430 | |
| COMMITMENTS AND CONTINGENCIES REDEEMABLE COMMON STOCK: | | | | | | | | |
| | | | | | | | | |
Common Stock – Class V; $0.0001 par value; 34,560,000 shares authorized; 27,057,600 and 27,057,600 shares issued and outstanding as
of September 30, 2022, and December 31, 2021, respectively. | | | 29,433,528 | | | | 301,052,617 | |
| Total redeemable common stock | | | 29,433,528 | | | | 301,052,617 | |
| STOCKHOLDERS’ EQUITY (DEFICIT): | | | | | | | | |
Noncontrolling Series A redeemable and convertible preferred stock; $0.0001 par value; $5,000,000 aggregate liquidation value;
1,152,000 and 1,152,000 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively. | | | 34,140,047 34,751,437 | | | | 37,670,161 | |
Common Stock – Class A; $0.0001 par value; 685,440,000 shares authorized; 23,063,813 and 20,016,067 shares issued and outstanding
as of September 30, 2022, and December 31, 2021, respectively. | | | 2,307 | | | | 2,002 | |
| Accumulated deficits | | | (211,325,844) (186,345,3 | ) | | | (338,709,688 | ) |
| Additional paid-in capital | | | 279,410,390 260,941,756 | | | | 241,872,747 | |
| Total stockholders’ equity (deficit) | | | 102,226,900 109,350,157 | | | | (59,164,778 | ) |
| Total redeemable common stock and stockholders' equity (deficit) | | | 131,660,428 138,783,685 | | | | 241,887,839 | |
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) | | $ | 274,142,319 286,549,740 | | | $ | 354,621,269 | |
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | Three months ended, | | | Nine months ended, | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
| OPERATING REVENUES: | | | | | | | | | | | | |
| Cryptocurrency mining | | $ | 12,283,695 | | | $ | 2,060,523 | | | $ | 50,715,424 | | | $ | 3,901,426 | |
| Energy | | | 11,454,016 | | | | 2,388,752 | | | | 26,946,549 | | | | 5,875,574 | |
| Capacity | | | 878,610 | | | | 1,069,040 | | | | 4,591,038 | | | | 2,352,276 | |
| Cryptocurrency hosting | | | 93,279 | | | | 499,724 | | | | 282,327 | | | | 1,742,242 | |
| Other | | | 39,171 | | | | 1,674 | | | | 91,941 | | | | 34,797 | |
| Total operating revenues | | | 24,748,771 | | | | 6,019,713 | | | | 82,627,279 | | | | 13,906,315 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| Fuel | | | 8,466,588 | | | | 2,411,186 | | | | 26,485,096 | | | | 6,511,706 | |
| Operations and maintenance | | | 19,528,08819,410,875 | | | | 2,835,315 | | | | 47,449,17747,331,964 | | | | 6,040,173 | |
| General and administrative | | | 11,334,21211,712,544 | | | | 3,469,830 | | | | 32,848,29133,226,623 | | | | 6,377,677 | |
| Impairments on digital currencies | | | 465,651 | | | | 91,040 | | | | 8,176,868 | | | | 466,286 | |
| Impairments on equipment deposits | | | - | | | | - | | | | 12,228,742 | | | | - | |
| Impairments on miner assets | | | 11,610,0000 | | | | - | | | | 16,600,0004,990,000 | | | | - | |
| Realized gain on sale of digital currencies | | | (185,396 | ) | | | - | | | | (936,506 | ) | | | (149,858 | ) |
| Loss on disposal of fixed assets | | | 461,9400 | | | | - | | | | 2,231,5400 | | | | - | |
| Realized loss on sale of miner assets | | | 0 | | | | - | | | | 8,012,2480 | | | | - | |
| Depreciation and amortization | | | 12,247,245 | | | | 1,158,374 | | | | 37,234,126 | | | | 2,463,549 | |
| Total operating expenses | | | 63,928,32852,117,507 | | | | 9,965,745 | | | | 190,329,582168,736,913 | | | | 21,709,533 | |
| NET OPERATING LOSS | | | (39,179,557) (27,368,73 | ) | | | (3,946,032 | ) | | | (107,702,303)(86,109,63 | ) | | | (7,803,218 | ) |
| OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | | | |
| Interest expense | | | (3,393,067)(2,530,56 | ) | | | (2,460,668 | ) | | | (10,813,302)(9,950,80 | ) | | | (2,594,751 | ) |
| Loss on debt extinguishment | | | (28,697,021(15,316,51 | ) | | | - | | | | (28,697,021)(15,316,51 | ) | | | - | |
| Impairment on assets held for sale | | | (4,159,004 | ) | | | - | | | | (4,159,004 | ) | | | - | |
| Gain on extinguishment of PPP loan | | | - | | | | - | | | | 841,670 | | | | 638,800 | |
| Changes in fair value of warrant liabilities | | | 1,302,065 | | | | 92,979 | | | | 1,302,065 | | | | (98,498 | ) |
| Realized gain on sale of derivative contract | | | 90,953 | | | | - | | | | 90,953 | | | | - | |
| Loss on disposal of fixed assets | | | 0(461,940 | ) | | | - | | | | 0(2,231,540 | ) | | | - | |
| Realized loss on sale of miner assets | | | 0 | | | | - | | | | 0(8,012,248 | ) | | | - | |
| Changes in fair value of forward sale derivative | | | - | | | | - | | | | 3,435,639 | | | | - | |
| Changes in fair value of convertible note | | | (1,204,739 | ) | | | - | | | | (2,167,500 | ) | | | - | |
| Waste coal tax credits | | | - | | | | 23,356 | | | | 53,443 | | | | 47,152 | |
| Other | | | 20,000 | | | | 10,336 | | | | 50,000 | | | | 48,521 | |
| Total other income (expense) | | | (36,040,813)(22,259,74 | ) | | | (2,333,997 | ) | | | (40,063,057)(36,063,83 | ) | | | (1,958,776 | ) |
| NET LOSS | | | (75,220,370) (49,628,47 | ) | | | (6,280,029 | ) | | | (147,765,360)(122,173,46 | ) | | | (9,761,994 | ) |
| NET LOSS attributable to noncontrolling interest | | | (44,000,155)(29,030,17 | )) | | | (4,328,460 | ) | | | (86,435,347)(71,465,37 | ) | | | (6,730,940 | ) |
| NET LOSS attributable to Stronghold Digital Mining, Inc | | $ | (31,220,215)(20,598,30 | )) | | $ | (1,951,569 | ) | | $ | (61,330,013)(50,708,09 | ) | | $ | (3,031,054 | ) |
| NET LOSS per share attributable to Class A common shareholders | | | | | | | | | | | | | | | | |
| Basic | | $ | (1.27)(0.8 | ) | | $ | (6.05 | ) | | $ | (2.82)(2.3 | ) | | $ | (17.05 | ) |
| Diluted | | $ | (1.27)(0.8 | ) | | $ | (6.05 | ) | | $ | (2.82)(2.3 | ) | | $ | (17.05 | ) |
| Weighted average number of Class A common shares outstanding | | | | | | | | | | | | | | | | |
| Basic | | | 24,631,62624,098,289 | | | | 322,342 | | | | 21,772,05721,592,286 | | | | 173,532 | |
| Diluted | | | 24,631,62624,098,289 | | | | 322,342 | | | | 21,772,05721,592,286 | | | | 173,532 | |
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Nine months ended, | |
| | | September 30, 2022 | | | September 30, 2021 | |
| | | (unaudited) | | | (unaudited) | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net loss | | $ | (147,765,360(122,173,469) |
| | $ | (9,761,994 | ) |
| Adjustments to reconcile net loss to net cash flows from operating activities: | | | | | | | | |
| Depreciation and amortization | | | 37,234,126 | | | | 2,463,549 | |
| Gain on extinguishment of PPP loan | | | (841,670 | ) | | | (638,800 | ) |
| Realized gain on sale of derivative contract | | | (90,953) 0 |
| | | - | |
| Loss on disposal of fixed assets | | | 2,231,540 | | | | - | |
| Write-off of bad debts | | | - | | | | 150,1620 | |
| Realized loss on sale of miner assets | | | 8,012,248 | | | | - | |
| Amortization of debt issuance costs | | | 2,681,0392,681,038 | | | | 643,0250 | |
| Stock-based compensation | | | 9,123,1249,073,124 | | | | 1,246,460269,932 | |
| Loss on debt extinguishment | | | 28,697,0210 | | | | - | |
| Impairment on assets held for sale | | | 4,159,0040 | | | | - | |
| Impairments on equipment deposits | | | 12,228,742 | | | | - | |
| Impairments on miner assets | | | 16,600,0004,990,000 | | | | - | |
| Changes in fair value of warrant liabilities | | | (1,302,065 | ) | | | 98,498 | |
| Changes in fair value of forward sale derivative | | | (3,435,639 | ) | | | - | |
| Forward sale contract prepayment | | | 970,000 | | | | - | |
| Changes in fair value of convertible note | | | 2,167,500 | | | | - | |
| Accretion of asset retirement obligation | | | 18,253 | | | | - | |
| (Increase) decrease in digital currencies: | | | | | | | | |
| Mining revenue | | | (50,715,424 | ) | | | (3,901,426 | ) |
| Net proceeds from sale of digital currencies | | | 46,209,82246,209,821 | | | | 434,529 | |
| Impairments on digital currencies | | | 8,176,868 | | | | 466,286375,246 | |
| (Increase) decrease in assets: | | | | | | | | |
| Accounts receivable | | | 1,336,817 | | | | (242,489)(710,72 | ) |
| Prepaid insurance | | | 5,321,5215,321,522 | | | | (278,538) 0 |
|
| Due from related parties | | | (58,735)(856,15 | )) | | | 302,973 | |
| Inventory | | | 55,538 | | | | 29,29177,071 | |
| Other current assets | | | (866,298 | ) | | | (3,713,832)(134,79 | ) |
| Increase (decrease) in liabilities: | | | | | | | | |
| Accounts payable | | | 4,878,6005,312,778 | | | | 21,141,0555,550,196 | |
| Due to related parties | | | 781,485781,486 | | | | 37,280319,071 | |
| Accrued liabilities, excluding sales tax liabilities | | | (407,909)(596,04 | )) | | | 3,832,36258,866 | |
| Contract liabilities | | | (55,742 | ) | | | 147,836147,841 | |
| NET CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES | | | (14,656,547 | ) | | | 12,456,227(5,049,958 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Purchase of land | | | - | | | | (29,919 | ) |
| Purchases of property, plant and equipment | | | (68,052,422 | ) | | | (34,735,332)(12,738,79 | ) |
| Proceeds from sale of equipment deposits | | | 13,844,780 | | | | - | |
| Equipment purchase deposits - net of future commitments | | | (13,656,428 | ) | | | (85,624,852)(78,688,46 | ) |
| NET CASH FLOWS USED IN INVESTING ACTIVITIES | | | (67,864,070 | ) | | | (120,390,103)(91,457,17 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Repayments of debt | | | (34,490,545 | ) | | | (7,811,150)(188,16 | ) |
| Repayments of financed insurance premiums | | | (3,992,336 | ) | | | - | |
| Proceeds from debt, net of debt issuance costs paid in cash | | | 97,337,454 | | | | - | |
| Proceeds from promissory note | | | - | | | | 38,987,33339,100,000 | |
| Proceeds from equipment financing agreement | | | - | | | | 24,157,1780 | |
| Proceeds from PPP loan | | | - | | | | 841,670 | |
| Proceeds from private placements, net of issuance costs paid in cash | | | 8,599,440 | | | | 97,064,318 | |
| Repayments of EIDL loan | | | - | | | | (150,000 | ) |
| Repayments of related-party debt | | | - | | | | (2,024,250 | ) |
| Buyout of Aspen Interest | | | - | | | | (2,000,000 | ) |
| NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | | | 67,454,013 | | | | 149,065,099132,643,570 | |
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | | (15,066,604 | ) | | | 41,131,22336,136,436 | |
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | | | 31,790,115 | | | | 303,187 | |
| CASH AND CASH EQUIVALENTS - END OF PERIOD | | $ | 16,723,511 | | | $ | 41,434,41036,439,623 | |
Third Quarter 2022 Financial Results
Revenues in the third quarter of 2022 increased 311% to $24.7 million compared to $6.0 million in the same quarter a year ago. This is primarily due to a $10.2 million increase in cryptocurrency mining revenue from deploying additional miners, and a $9.1 million increase in energy revenue driven by higher prevailing power prices per MW and higher MW generation as a result of the November 2021 Panther Creek Plant acquisition.
Operating expenses in the third quarter of 2022 increased 541% 423% to $63.9 million $52.1 million compared to $10.0 million in the same quarter a year ago due to several factors. Operations and maintenance expense increased by $16.7 million $16.6 million as a result of the November 2021 Panther Creek Plant acquisition, higher labor and maintenance costs related to the previously disclosed planned maintenance, and the ramp up of cryptocurrency mining operations. Depreciation and amortization increased by $11.1 million primarily from deploying additional miners and transformers. General and administrative costs increased by $7.9 million $8.2 million due to legal and professional fees, insurance costs, and compensation as the Company continues to organize and scale operations. Fuel expenses increased by $6.1 million driven by higher MW generation, primarily due to the November 2021 Panther Creek Plant acquisition, and increased fuel delivery costs from higher diesel prices.
Net loss for the third quarter of 2022 was ($75.2) million ($49.6) million compared to a net loss of ($6.3) million for the same quarter a year ago.
Adjusted EBITDA for the third quarter of 2022 was a loss of ($3.0) million, compared to $0.0 million for the same quarter a year ago (see reconciliation of Non-GAAP financial measures).
***
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing under the Securities Act of 1933 unless specifically identified therein as being incorporated therein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
| Exhibit No. | | Description |
| | Corrected version of the press release issued by Stronghold Digital Mining, Inc. dated as of November 9, 2022. |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Furnished herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Stronghold Digital Mining, Inc. |
| | |
| | /s/ Gregory A. Beard |
| | Gregory A. Beard |
| | Chief Executive Officer and Co-Chairman |
| | |
Date: November 10, 2022 | | |
